E-Transformation: Evolutionary Challenges to Render South Africa a Digital Society
Luci Abrahams

The article on the background of the extensive statistical information shows the process of development of information society in South Africa. A marked differentiation of the population in terms of access to information and communication technology in general and the Internet in particular, due to sharp differences in income and the high cost of digital services. Attention is drawn to the lack of definition of public policies in this area.

Key words: digital society, innovative economy, electronic communications, e-infrastructure, Internet services, mobile communications.

Introductory remarks: Is a digital society an information society?

The 21^st century is now well advanced and is revealing itself to be a knowledge-intensive, digital century in many parts of the world. The sub-Saharan African region makes the smallest percentage GDP contribution to global value-added at 5.4% of total global value and the largest economies in the region are Nigeria and South Africa. South Africa is the smallest by population and GDP of the countries in the BRICS quintuplet.

A brief overview of the state of the digital society in South Africa in 2015 sees a country rich in electronic communications infrastructure, yet poor in the advancement of Internet-based services, particularly in rural parts. This can largely be attributed to the low levels of fixed and mobile broadband access, arising partly from the reality of low-income levels for the majority of households. The most recently published household income data shows that, for the 48 percent of Black African households (80 percent of the population is Black), 25 percent of Coloured, six percent of Indian/Asian and three percent of White households in the lowest and second lowest quintiles, per capita income was at or below ZAR9,886 per annum in 2010/2011 (approximately RUB42136 or USD829 per annum) (StatsSA, 2012). While these statistics are for four years ago, household incomes have increased only marginally, hence they reflect the continued income disparity across population groups, 16 years after the transition to democratic rule, negatively affecting demand for electronic communications products and e-services.

For South Africa, the question arises to what extent a country that has adopted digital technologies has experienced e-transformation to become an information-based society and knowledge-based economy, the subject discussed in this short contribution.

Key statistics and positioning of South Africa in the global economy

According to data from the national statistical agency, South Africa has a population of 54 million, of which approximately forty percent live in two provinces: 12,91 million in Gauteng, the smallest province by geography but the main contributor to GDP at approximately 34%; and 10,69 million in KwaZulu-Natal (StatsSA, 2014). Sixty-one percent of the population is between the ages of 15 and 59. Among South Africa’s nine provinces, Gauteng province is land-locked and highly urbanized, while KwaZulu-Natal province has a large rural and a smaller urban population and a 400km coastline. Three undersea-cable landing stations are located on this coastline at Mtunzini in the north. GDP in 2014 was ZAR3,8 trillion in the national currency or approximately RUB16,3 trillion or USD315 billion. The main economic sectors, in a highly diversified economy, are mining and agriculture 11%, manufacturing, construction and energy 21% and the services sector, which contributed 68% to GDP (StatsSA, 2015). South Africa is ranked 33 out of 192 countries by GDP for 2013 (IMF, 2015; WEF, 2014).

R&D and innovation capacity 2012/2013 and ICT industry development

South Africa’s R&D investment was ZAR23,8 billion in 2012/2013 (financial year April 2012 to March 2013). While gross domestic expenditure on research and development (GERD) increased compared to the previous financial year, GERD as a percentage of GDP has declined from its peak of 0.95% in 2006/7 to 0.76% in 2012/13 (CESTII, 2014), moving in the opposite direction to the policy objective of achieving GERD of 1% of GDP by 2008. The most recent innovation survey, for 2008, shows that approximately 65% of South African firms conducted technological and non-technological innovation activities, including product, process, marketing and organisational innovations (CESTII, 2011). Economic sub-sectors in which innovation is prevalent includes the banking and finance sub-sector, the hospitality and tourism sub-sector, and the software development sub-sector.

The ICT industry is relatively sophisticated compared to countries of similar per capita GDP. The size of the information technology and communications markets was estimated at USD42.6bn in 2013, contributing approximately 8.2% to GDP (SAEEC, no date) [1]. According to the Electro-technical Export Council, the strongest component of the sector is the software sector, specializing in packaged software solutions in the fields of mobile banking, e-schooling, electronic government and a range of pre-payment applications for e-services. One of the oldest companies is the electronics giant Reunert Limited, established in 1888 and listed on the local stock exchange in 1948, which employed 2,256 people in its electrical engineering businesses, 2,792 people in its ICT businesses and 1,181 people in its defence electronics R&D and components businesses. Reunert owned Nashua Mobile, which operated as a mobile virtual network operator (MVNO) until 2014 (Reunert, 2015), but was sold at a projected income of ZAR2billion, due to the inability to compete against the dominant firms MTN and Vodacom. The group exports to Europe, Africa, Asia, Australia, North and South America. One of the most powerful group of companies in the sector is the Altron Group, who services include vehicle tracking and telematics, a range of managed IT solutions, Internet connectivity and digital two-way radio solutions (Altron, 2015).

The decadal growth of the IT sector makes South Africa an economy in which the ‘Internet of Things’ is a reality, as more devices are connected every day to offer an increasingly wider range of purposes and services in firms and households, though with a strong urban bias. The most advanced applications sectors are the banking, finance, tourism and hospitality sectors, while electronic government and e-schools are in their infancy.

The state of information infrastructure and access to the Internet

The evolving broadband ecosystem is served by six undersea cable systems, the Eastern Africa Submarine System (Eassy), the South Africa-Far East (SAFE) and the SEACOM/Tata TGN-Eurasia (SEACOM) cable systems landing at Mtunzini on the north-eastern KwaZulu Natal coast; as well as the Africa Coast to Europe (ACE) and the West African Cable System (WACS) landing at Yzerfontein, and the SAFE and SAT-3/WASC cables landing at Melkbosstrand on the Western Cape coast. These international cable systems contribute bandwidth of approximately 16 Tbps to South Africa’s Internet connectivity (Song, 2014), driving participation in global trade and tourism, in international banking and finance, in global scientific and research collaboration. The South African national research and education network, SANReN, is a 10Gbps backbone that offers high-speed connectivity to universities, scientific and research institutes, the National Library, museums and the e-schools network (TENET, no date), making it possible for South African scientists to participate in global research in fields such as high-energy physics and bioinformatics.

The electronic communications market has four main competitors, the fixed and mobile electronic communications incumbent operator, Telkom; and three mobile service and mobile broadband providers Cell C, MTN and Vodacom. Telkom, Vodacom and MTN have dominated the electronic communications market since 1997, for both mobile voice and mobile Internet, providing geographic coverage of mobile voice and data networks across more than 90 percent of South Africa. As with many countries in Africa, the largest financial investment to date has been made in backhaul, middle-mile and last mile infrastructure with lower investment in content services (GSMA, 2011, p.20, Figure 17), indicative of early stage adoption of digital goods and services. Greater access to the Internet can lead to increased demand for content. However, Internet access is limited not only by low household income levels, but also by high prices, partly explained by delays of more than five years in the assignment of high demand spectrum in the 2.5GHz and 3.6GHz bands, that would potentially enable greater supply of high-speed mobile Internet in urban and rural areas, at a lower infrastructure cost than current cost.

Municipal broadband projects initiated in many of the large metropolitan municipalities have been slow to translate multi-billion rand investments into real access for citizens, while other forms of Internet access have not attracted an equivalent level of interest at local government level. Only one of the six metros, the Tshwane Metropolitan Municipality, is successfully offering Internet access for residents through its free public Wi-Fi initiative. Other innovative forms of access include high-speed Internet to the home at speeds between 10 Mbps and 100 Mbps, such as the service offered by new entrant Fibrehoods, initially only in a few high-income neighborhoods. The Ookla Net Index reports the household broadband download speed for data as 7.3 Mbps in May 2015, as compared to the global index of 23.3 Mbps for the global download average; and 10.4 Mbps mobile broadband download speed for South Africa, as compared to the global index of 12.4 Mbps, but the cost of access is very high at the equivalent of USD18.81 compared to the global average of USD5.21 (Ookla, 2015). There is diversity in download speeds across the 50 cities and towns reported, from 17.91 Mbps in rural Tzaneen to 8.38 Mbps in the economic centre Johannesburg and 4.02 Mbps in rural Worcester. Only three Internet service providers (ISPs) offer download speeds greater than 30 Mbps.

In the two decades from 1991 to 2013, South African media grew from seven to 192 TV stations, from 34 to 234 radio stations, from 250 to 600 consumer magazines and newspapers, from 300 to 650 business to business print media, from 330 to 490 community/local newspapers and magazines, some of which are available online (OMD, 2014). Two digital broadcast services are available in the subscription TV market, but the digital broadcast migration has faltered in the public service broadcast environment due to the failure of the policy-maker to finalise arrangements for the production of set-top boxes to provide a digital signal. The public broadcaster, the South African Broadcasting Corporation (SABC) reaches approximately 90% of the population through radio and TV and offers content on three analogue channels, while the commercial digital satellite TV station, DStv, offers over 140 channels, has more than 3.8 million subscribers and reaches more than 11 million viewers (OMD, 2014).

Empowerment and disempowerment in digital access

The legacy of a history of dispossession and disempowerment remains and is visible in the wide disparity in income levels, with the majority of households earning below ZAR60,000 per annum unable to afford regular usage of electronic communications, particularly broadband Internet communications. A 2014 report on the “lived cost” of communications revealed that members of low and very low-income households experience limited value for money from mobile communications or the Internet as the majority of focus group participants were limited to making calls, receiving calls, sending or receiving SMS’s and instant messages (Abrahams & Pillay, 2014). Few participants in the focus groups experienced the wide array of communications services and mobile Internet communications that are on offer, limiting their horizons for a digital future. Some OTT services, such as Whatsapp, are ideal for this segment of the population, as they are low-cost or no-cost services, which offer the same or better communications experience than voice or SMS.

A larger proportion of the population has mobile voice access compared to any other form of access. The general household survey for 2013 (Stats SA, 2014) reported that 12.9 percent of households had access to both mobile phones and landlines, while 81.9 percent had access to mobile phones only, and 0.2 percent had access to landlines only. Only 5 percent of households had neither mobile nor landline access. With respect to the Internet, only 10 percent of households had access to the Internet at home, though approximately 41 percent of households had at least one member who accessed the Internet anywhere, including home, work and an educational institution. The disparity in Internet access is great across urban and rural areas, with Internet access in metropolitan areas at 16 percent and rural Internet access in KwaZulu Natal and the Eastern Cape reported to be 1 percent.

Given the large proportion of low-income and very low-income households, government proposed to subsidise set-top boxes, but production has not yet commenced. Most households in South Africa still watch content on the four available analogue TV channels, three provided by the public service broadcaster, the South African Broadcasting Corporation (SABC) and the free-to-air channel eTV, while middle- to high-income households have access to possibly a hundred or more channels on DSTV, as well as broadcast content on the Internet.

The relatively low levels of Internet access has resulted in the slow emergence of digital cities and towns, with large firms and middle- to high-income households connected to broadband and the Internet, while small and micro-enterprises and low-income households experience a significant degree of digital exclusion. In the absence of personalized digital access, the increasing presence of free Wi-Fi hotspots in commercial environments such as coffee shops and shopping malls is creating opportunities for young people to connect wirelessly on laptops, tablets and hand-held devices, if they can afford the access device.

Current levels of ICT human resources and skills development

Research on the media and ICT sectors (MICT sector) reports that there are 19,937 employers and an estimated 439,756 employees, including in the advertising, film and electronic media, electronics, information technology and telecommunications sub-sectors (JCSE, 2014). The main application of skills is in the areas of cloud computing, network infrastructure, information infrastructure, applications development, business intelligence, database development, mobile computing, web development, data storage, operating system and enterprise resource planning, in descending order of importance.

A graduate degree or diploma qualification are the most desired qualifications, as expressed by the executives and IT managers interviewed, followed by demand for postgraduate qualifications or any other educational certification. The skills in greatest demand are programming, business analysis and business intelligence skills, with no reflection on how these particular skills foster content development for electronic content services. The largest proportion of skilled practitioners are present in the MICT sector (54 percent) and in the banking, finance and insurance sector (16 percent). The weakness of e-transformation can be seen in the very small proportion of skilled practitioners in the education and training (7 percent) and health and welfare (2%) sectors (JCSE, 2014, p.28).

South Africa’s policy thinking about e-transformation

Policy thinking and direction has developed very slowly over a fifteen year period in which the main policies are the White Paper on Telecommunications published in 1996, the White Paper on e-Education published in 2004, the Information Society and Development Plan published in 2006, the national broadband policy SA Connect published in 2013 and the National Integrated ICT Policy Review Report published in 2015 (DTPS, 2015). This latter document is the outcome of a two-year government-led review process, with participation from the private sector, academia and civil society. The final review report does not represent government policy, but rather input from a panel of knowledgeable persons as guidance to government policy-makers.

The strength of the review paper is that it covers a very wide range of issues required for e-transformation in economy and society. Furthermore, it highlights the reality that a wide range of barriers to e-transformation have evolved in the past decade since adoption of the Electronic Communications and Transactions Act 2002 and the Electronic Communications Act 2005, including low levels of competition in infrastructure markets, ineffective regulation of markets and resources such as spectrum, and the absence of institutional will to push forward the rapid deployment of broadband infrastructure. In raising these points, the review paper documents what is already known and recommends remedies and approaches to create a stronger policy implementation and regulatory environment.

The weakness of the review paper is that many of the recommendations made to address the barriers are vague and sound too much like abstract “best practice”, rather than reflecting the specific circumstances of a future digital South Africa. For example, no mention is made of the Thusong Service Centres, community centres offering access to government information and services in rural and low-income communities, of which there are 152 such centres across the country; there are only two references to e-education and e-health, relating to infrastructure and ICT applications, but not to the multiple transformations required to achieve e-education or e-health. The review paper advises that an intergovernmental task team is preparing a “National e-Government Strategy 2030” and makes a number of recommendations for this strategy. However, the e-government strategy will evolve under the leadership of the Department of Public Service and Administration, while the “Integrated ICT Strategy” evolves under the leadership of the Department of Telecommunications and Postal Services”, raising the risk that neither of these policy or strategy documents will offer integrated policy for the digital society. The silo-based nature of government operations strongly mitigates against integrated thinking in favor of co-ordinated thinking, which often falls apart in the making.

Key issues that require attention in policy and regulation are the continued digital divide, regulatory independence, competitive markets, and investment in content services.

Concluding remarks: South Africa’s practice of e-transformation

While South Africa has relatively strong infrastructure foundations for a digital economy, the cost of digital access remains high compared to household income for the majority of households. The pace of e-transformation in commerce and industry is more advanced than in the major public service fields of education, health and policing, as public institutions battle to introduce service innovation and adapt to the electronic environment. In the government service sector, the most notable success for an e-transformation project is the online filing of annual tax data to the South African Revenue Services. e-Society is a strongly emerging phenomenon, particularly amongst young people across middle-income and low-income households, with the continued strong growth of social media and over-the-top services such as Whatsapp messaging and free voice calls and Instagram. However, Internet-based operations are not yet affordable for many low-income small and micro-businesses, which have yet to experience the reality of a digital world. While South Africa has a relatively strong foundation for digital access, the transition to an information society and digital economy in the banking and finance, travel and tourism, mining and agriculture, health and education, film and media, and other industries is only beginning.

[1]This statistic is very different from the 2.9% contribution to GDP reported in the Information and Communication Technology satellite account for South Africa, 2012 (StatsSA, 2012) and the difference will need to be examined.

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Luci ABRAHAMS

Director LINK Centre, University of the Witwatersrand, Johannesburg, South Africa